21 November 2017
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The role of local law in making Singapore investment heaven

15 Sep 2017

Singapore has long been considered an economic powerhouse, and not just in Asia. According to statistics from the World Bank, Singapore is the world’s 36th biggest economy. Its importance as a major global port puts it further up the table, with trade between Singapore and the Americas, Europe and Oceania proving highly important to both sides.

Much of Singapore’s economic success can be put down to the legal frameworks that have been put in place over the last few decades. For investors in local businesses, customers of Singaporean companies and even individuals looking to move abroad to work for companies over here, the local laws have helped to make doing business pretty easy.

Laws governing local business are spread across a variety of acts passed by government. Arguably the most pertinent of all is the Companies Act, which was amended in 2014. This act covers many areas of business law, from the constitutions of businesses to how shares in publicly-traded companies should be distributed.

Having just one wide-ranging piece of legislation to cover differing areas of business law has given many Singaporean firms an advantage over competitors in neighbouring countries. Compared to Malaysia, Indonesia and even China, there is less that business owners have to remember.

What investors need to know

Foreign investors looking to put their money into Singaporean businesses will find their attempts to do so just as easy as those based in Singapore. Investment laws are the same for foreign investors as they are for local ones, with two exceptions - broadcasting and local news media. Businesses in those two areas are required by law to be owned by Singaporeans only.

For investment in new business, the Developmental Investment Fund Act was created to aid growth areas in the economy. It concerned putting money into infrastructure, technology and science, providing that said money would help to boost Singapore’s economy. Associated acts, such as the Development Fund Act, were passed soon afterwards to safeguard its funds.

Investing in this part of the world has been made easier due to the popularity of the Singaporean Dollar. Some of the country’s older entrepreneurs needed to learn to trade currency. Today, the SGD’s position is almost on a par with major regional currencies, with the transparency of financial laws aiding its ascent.

The stock markets, meanwhile, have reflected the economy’s growth for many years. The SGX has risen significantly in value since the beginning of 2017, with the simplicity and security of local business laws playing their part in boosting investors’ confidence.

Hiring staff

When it comes to hiring staff, local employment law could not be simpler. For the recruitment of locals, the Employment Act covers payment, paid holiday, the hiring of contractors and maternity leave. Many of these laws also apply to the recruitment of foreign workers, but they also need to gain an Employment Pass.

This is for new employees who earn at least $3,600 per month and have a certain level of qualifications. All work permit-style systems for hiring foreign employees apply to all incoming workers to Singapore, with the exception of the Work Holiday Pass (under Work and Holiday Visa Programme) for Australian students wanting work and live in Singapore for up to one year.

Compared to the rules in place for employing foreign workers in many EU countries, this gives investors less of a headache. Usually, red tape can get in the way of hiring the best staff from across the globe, but it does not seem to be the case in Singapore.

For Singapore to continue thriving, existing business laws need to be upheld. From making investment in businesses as transparent as possible to protecting intellectual property and clarifying who they can hire from abroad, complacency should not set in.

Neil Buckland for IG Trading

© 2017 IG Asia Pte Ltd